Activity in the manufacturing is declining. The ISM manufacturing index
fell to 49.1 during August from 51.2 in July. It was the lowest level since
January 2016 and was below the expansion peak of 60.8 last August. The Action Economics Forecast Survey
anticipated a reading of 51.3. Since 2008, there has been a 74% correlation
between the index level and quarterly growth in real GDP.

The separate export index weakened to 43.3 last month from
48.1 in July. It was down from the expansion high of 62.8 reached in February of
last year and was the lowest reading since June 2009. Below the break-even point
of 50, the figure indicated contraction in foreign trade.

Performance amongst the ISM index components was mostly
negative last month. The overall new orders index fell sharply to 47.2, the
lowest level since June 2012. The production series declined to 49.5 indicating
lessened production, on balance, for the first time in three years. The supplier delivery index
fell to 51.4. That reflected slightly quicker delivery speeds versus last month,
but a sharp acceleration since the middle of last year.

Also moving lower was the employment index to 47.4,
indicating net-contraction in payroll levels for the first time in roughly three
years. A greatly lessened 15% (NSA) of respondents reported increased payrolls while
a sharply higher 19% reported a decline. Since 2008, there has
been an 84% correlation between the employment index and the m/m change in
factory sector payrolls.

The prices paid series, which is not part of the composite
series, improved slightly m/m to 46.0, but indicated price deflation for the
fifth month this year. It remained below the high of 79.5 in May of 2018. A
lessened 15% of respondents reported increased prices while 23%
reported them lower.

Amongst other series in the ISM survey, the order backlog measure
notched up to 46.3, but still indicated a rapid decline in unfilled orders. The
imports index fell to 46.0, the lowest level since December 2015.

The ISM figures are diffusion indexes where a reading above
50 indicates expansion. The figures from the Institute for Supply Management can
be found in Haver's USECON database; further detail is found in the SURVEYS
database. Commodity prices can be found in USECON as well as the CMDTY
database. The expectations number is available in Haver's AS1REPNA database.